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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Scary 20 years yet what happened?

Posted by Muthu on May 27, 2015

I was going through a HDFC mutual fund presentation. It has listed some negative things which have happened during last twenty years. Going through that, I developed the idea to write this post.

In 1996, Congress lost the general elections. This resulted in communist supported and participating third front government coming to power. A hardcore communist, Indrajit Gupta, was India’s home minister from 1996 to 1998.

You would also remember that BJP first came to power in 1996 and could survive only for 13 days. So between 1996 and 1998, there was huge political uncertainty and we had three governments in 3 years.

In 1997, Asian financial crisis happened. Much of East Asia went through severe currency crisis raising fears of serious economic meltdown.

In 1998, BJP again formed government, which only lasted for 13 months and was in constant turmoil due to tantrums of coalition partners.

In 1998, Indian conducted nuclear tests. Western sanctions were imposed crippling the country’s financial situation.

In 1999, we had a fight with our neighbour Pakistan. Kargil war brought both the nations to brink of a major confrontation.

In 2000, tech bubble burst. Technology stocks world over crashed eroding investors’ wealth.

In 2001, 9/11 attacks happened, creating a huge geo-political crisis. Markets tanked.

In 2001, Ketan Parekh scam happened. UTI crisis happened. IT stocks in India lost value as much as 90%.

In 2001, Indian parliament was attacked by terrorists.

In 2004 general elections BJP lost. Congress government dependant on left support for survival came to power. There was common minimum program and weekly breakfast meetings. Government has to keep on yielding to the left tantrums to stay in power.

After 2004, the global commodities prices started rising. Oil prices also started rising sharply.

In 2008, global financial crisis, considered as worst financial crisis after great depression happened. World markets collapsed, Sensex dropping more than 50%.

In 2008, Mumbai terrorist attack happened.

From 2010-13, corruptions, scams and scandals started hitting the government. 2G, Common Wealth Games and Coal gate are some of the major scams. UPA-2 was most part immobilised and was fighting one corruption scandal after another.

In 2013, markets panicked due to QE tapering worry. GDP growth slowed down. Current Account Deficit (CAD) and Fiscal Deficit (FD) worsened threatening ratings downgrade. Inflation was very high and the currency weakened.

In 2014, rise of ISIS.

If somebody looked for a certainty or lack of problems, he would have never found an opportunity to invest. Every day newspapers and 24/7 media would have never given him courage to go ahead.

Despite all the above problems, companies have grown, their sales and profits have grown, earnings and hence Sensex has grown, mutual fund’s returns have grown… lot of every day growth which would not make into daily news have been continuing to happen.

As I’ve mentioned earlier, many mutual funds multiplied investor wealth by 40 to 100 times during the above period.

As per a CRISIL study last year, during the past 17.5 years, equity funds as a category has given a return of 22.6%.

Despite worrying events and scary headlines, if one has stayed invested, he would have multiplied his wealth many fold.

Investors who bet on Indian entrepreneurism and the future of this country have been amply rewarded. What set of problems and issues we would face in next 20 years is not known now. But we can be sure that there would continue to be global and domestic challenges, surprises and shocks, scams, bull and bear markets in next twenty years as well.

Despite that we would continue to grow and both quantum and quality of growth would be much superior to what we have seen in the past.

If you believe this and invest accordingly, you can very well be part of this India growth story and reap rewards.

All you need to do is to keep looking far ahead (the bigger picture), ignore every day news, have great degree of patience and give time for your investments to grow into fortune.

Uncertainty would continue. We cannot wish it away. Though it may sound paradoxical, accepting every day uncertainty would bring certainty of wealth in the long run.

6 Responses to “Scary 20 years yet what happened?”

  1. SalimMomin said

    Hi Muthu! Nicely expalined.
    It was something like News channel has given flashes on 31st December about the incidents & events occurred throughout the year.

    The only problem with investors are that most of them have never experienced the “magic” effect of compounding on their investments due of short tenure of their investments.
    But I am sure the “young India” will have different approach in next 20 Yrs. to participate in the journey of Wealth creation.
    Thanking you!
    Salim Momin,CFP.

  2. Jigsaw said

    Was a nice read Sir. Thanks

  3. KK said

    Very well written Muthu.. an awesome read, gives a lot of confidence. Kudos & Thanks a lot!

  4. Siddhartha said

    Really nice article….Muthu. You explanations are always so simple and practical.
    Kudos !

    Can you post an article on ‘best way of investing a lump sum’? I am sure it will be beneficial to many of us.

  5. Lohith said

    Rightly said patience really pay us for long term.

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